Doctrine of Frustration: Under Contract Act
π Doctrine of Frustration under Indian Contract Act, 1872
1. Statutory Basis
The doctrine of frustration in India is embodied in Section 56 of the Indian Contract Act, 1872.
Section 56 states:
An agreement to do an impossible act is void.
A contract to do an act which becomes impossible or unlawful after it is made becomes void when the act becomes impossible or unlawful.
If the promisor knew that the act was impossible or unlawful, he must compensate the promisee.
π Thus, impossibility of performance (either initial or subsequent) makes a contract void.
2. Meaning of Doctrine of Frustration
βFrustrationβ means the discharge of a contract when performance becomes impossible, illegal, or radically different from what was agreed, due to circumstances beyond the control of parties.
It automatically terminates the contract, without any partyβs fault.
It protects parties from liability where supervening events destroy the foundation of the contract.
3. Grounds of Frustration in India
A contract may be frustrated when:
Destruction of subject matter β if the thing essential for performance is destroyed.
Change of circumstances β making performance impossible or fundamentally different.
Death or incapacity of a party β where personal performance is essential.
Supervening illegality β performance becomes unlawful by a change in law.
Government intervention β prohibiting or restricting performance.
βοΈ Important Case Laws
Satyabrata Ghose v. Mugneeram Bangur & Co. (1954, SC)
Facts: A developer agreed to deliver plots of land. During WWII, the government requisitioned the land, delaying performance.
Held: The Supreme Court said frustration is not confined to literal impossibility. Even if performance is possible, but the object of the contract is defeated, the contract becomes void.
Principle: Section 56 covers not only physical impossibility but also when performance becomes impracticable or useless.
Taylor v. Caldwell (1863, UK) (only as background, not applied since you asked without external law) β Indian courts referred to it historically, but Satyabrata Ghose firmly localized the principle under Section 56.
Naihati Jute Mills Ltd. v. Khyaliram Jagannath (1968, SC)
Facts: A jute supply contract was affected by government restrictions on imports.
Held: The Supreme Court said mere commercial hardship or rise in prices does not amount to frustration. Only a fundamental change in circumstances can apply.
Alopi Parshad & Sons Ltd. v. Union of India (1960, SC)
Facts: A contract to supply ghee at fixed rates continued during wartime when prices rose sharply. The supplier claimed frustration.
Held: The Court ruled that difficulty or commercial hardship is not frustration.
Principle: Doctrine does not apply if performance is still possible, though unprofitable.
Energy Watchdog v. Central Electricity Regulatory Commission (2017, SC)
Facts: Power supply agreements were affected by coal supply issues and price rise.
Held: The Court clarified that force majeure clauses are separate, and frustration applies only when performance is impossible.
Principle: Economic hardship β frustration.
π Summary Table
| Aspect | Explanation | Case Law |
|---|---|---|
| Statutory Basis | Section 56, Contract Act β contract void if performance becomes impossible/unlawful | β |
| Meaning | Frustration discharges contract when performance becomes impossible or purposeless | Satyabrata Ghose (1954) |
| Grounds | Destruction of subject matter, death/incapacity, supervening illegality, govt intervention | β |
| Not Frustration | Mere hardship, delay, rise in prices | Naihati Jute Mills (1968), Alopi Parshad (1960) |
| Modern View | Force majeure clause governs; frustration applies residually | Energy Watchdog (2017) |
β
Final Takeaway
The Doctrine of Frustration in India is governed by Section 56 of the Contract Act, 1872. It applies when performance becomes impossible or radically different due to circumstances beyond control. But it does not apply to mere hardship, delay, or commercial difficulty. Indian courts (from Satyabrata Ghose to Energy Watchdog) have consistently emphasized that frustration is an exception, not a rule, and must be narrowly applied.
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